On May 24, 2023, the High Court of Zimbabwe ruled in favor of Nestle Zimbabwe (Pvt) Ltd in a case against the Zimbabwe Revenue Authority (ZIMRA) regarding invalid tax assessments. The court declared the assessments issued by ZIMRA on January 17, 2022, for the tax years 2009-2013 to be invalid. The judgment, delivered by Ndlovu J, reaffirmed a previous Supreme Court decision that the assessments were null and void.
The background facts of the case reveal that Nestle Zimbabwe is a registered taxpayer and had submitted self-assessment tax returns for the period 2009-2013 in accordance with the Income Tax Act [Chapter 23:06].
However, in 2016, ZIMRA conducted an investigation and audit of Nestle’s affairs, leading to the issuance of additional assessments. Nestle objected to these assessments, but the Special Court for Income Tax Appeals ruled against the company. Nestle subsequently appealed to the Supreme Court, which ruled in their favor, stating that the additional assessments were invalid and nullities.
Following the Supreme Court judgment, ZIMRA persisted and sent a letter to Nestle on January 17, 2022, attaching replacement assessments for the 2016 assessments. The letter claimed that the tax had already been paid on the assessed amounts and there was no obligation to pay based on the new assessments.
In response, Nestle’s legal representatives requested the basis and legal justification for these assessments but received a reply from ZIMRA stating that the 2016 assessments were not tampered with, replaced, or varied. ZIMRA argued that the new assessments were in respect of the same old determination made in 2016.
The central issue before the High Court was the legality of the January 17, 2022, assessments issued by ZIMRA. The court emphasized that the Supreme Court’s ruling had rendered the 2016 assessments null and void, restoring Nestle’s self-assessments as the only valid assessments in accordance with the law.
The court held that ZIMRA had no legal basis to issue the notices of assessments it purportedly issued after the Supreme Court judgment. The court further stated that it had no power to review the Supreme Court’s decision, and ZIMRA could not circumvent the judgment to validate an invalidity.
Consequently, the High Court ruled in favor of Nestle Zimbabwe and declared the assessments issued by ZIMRA on January 17, 2022, for the tax years 2009-2013 to be invalid. The court emphasized that Nestle’s tax obligations were based on their self-assessments, which had been paid and cleared after the Supreme Court’s ruling. Therefore, ZIMRA’s additional assessments from 2016 were deemed invalid and had no power to create a legal obligation to pay tax.
The judgment delivered by Ndlovu J on May 24, 2023, concluded that Nestle Zimbabwe was entitled to the declaratur sought in their application. The court ordered that the assessments issued by ZIMRA on January 17, 2022, be declared invalid, and further directed ZIMRA to pay Nestle’s costs of the suit.
The victory of Nestle Zimbabwe in its case against the Zimbabwe Revenue Authority (ZIMRA) regarding invalid tax assessments is likely to have an impact on other companies that are taxpayers. The ruling by the High Court, affirming the Supreme Court’s decision to declare the assessments null and void, sets a precedent and provides clarity on the legality of tax assessments in similar situations. The impact can be seen in the following ways:
Legal Precedent: The court’s decision establishes a legal precedent that invalidates assessments issued by revenue authorities if they are found to be contrary to the requirements of the law. This precedent provides a stronger foundation for other taxpayers to challenge and contest assessments that they believe are invalid or unjust.
Protection of Taxpayer Rights: The court’s ruling reinforces the importance of protecting taxpayer rights and ensuring that revenue authorities adhere to proper procedures and legal requirements when issuing assessments. It serves as a reminder that taxpayers have the right to challenge assessments that are not in accordance with the law.
Clarity on Assessment Validity: The court’s decision brings clarity to the issue of assessment validity, particularly in cases where additional assessments are issued following successful objections and appeals. The ruling confirms that assessments declared null and void by the Supreme Court cannot be replaced or amended without a proper legal basis.
Encouragement for Appeals: The victory of Nestle Zimbabwe may encourage other companies and taxpayers who have faced similar situations to pursue appeals and challenge assessments that they believe are invalid or unjust. The ruling provides them with legal precedent and a stronger basis to contest assessments and seek a favorable outcome.
Improved Compliance and Transparency: The court’s decision may also encourage revenue authorities to review their assessment procedures, ensuring compliance with the law and promoting transparency. Authorities may be more cautious in issuing assessments and strive to provide clear justifications for their actions, ultimately fostering a more fair and accountable taxation system.
It is important to note that the impact on other companies will depend on the specific circumstances of each case and the relevant tax laws and regulations in place. Nonetheless, the Nestle Zimbabwe case sets an important precedent that may influence similar disputes and provide guidance to other taxpayers facing invalid tax assessments.
Source: High Court Judgement [2023] ZWHHC 203
